April 12, 2021
Restaurants in a handful of greater Bay Area counties have filed class-action lawsuits seeking refunds for liquor license and health permit fees assessed by the state and counties even though they were forced to shutter completely or operate at significantly lower capacity under COVID-19 public health orders.
Restaurant owners in Contra Costa, Santa Clara, Monterey and Sonoma in recent days have joined those across much of the state, including San Francisco, San Diego and Los Angeles, that filed similar lawsuits against the California Department of Alcoholic Beverage Control and the counties in which they operate.
The lawsuits, filed separately in each county, allege that the counties and state have been “unjustly enriched by the illegal exaction of money” from the restaurants “under the guise of a permit, licensing or tax fee” for services the business owners couldn’t provide because of health order restrictions.
As such, the lawsuit seeks to have the court declare that any past and ongoing collection of permit and licensing fees are “invalid and illegal.”
Brian Kabateck, a Los Angeles-based attorney representing the suing restaurant groups, called the continued imposition of fees amid the pandemic “offensive and tone-deaf.”
“We view this as significant government overreach,” Kabateck said in a press release. “The defendants collected these fees at a time during the pandemic when officials were ordering the businesses to shut down or drastically limit operations.”
During the first year of the Bay Area’s COVID-19 public health orders, restaurants in Contra Costa and Santa Clara counties were forced to close indoor dining 86% of the time and outdoor dining at least 35%, according to an earlier analysis by this news organization.
For more than a year, restaurants across California have struggled to stay afloat and maintain their bottom line amid the ever-changing COVID-19 shutdown orders. Many restaurants have even closed up shop for good.
Restaurant owners who willingly adjusted their operations to comply with the closure orders argue they were unjustly punished for doing so, particularly in the form of permits and licenses that the government collected but the restaurants could not use.
“These fees can make the difference between rehiring a furloughed employee or not,” Dean Griffith, president of The Old Spaghetti Factory restaurant in Contra Costa County, said in a press release. “Restaurants are doing everything they can just to survive until operations are back to normal levels,” Griffith added.
Santa Clara County Counsel James Williams called the lawsuit against his county “meritless.”
Because restaurants were always permitted to remain open for take-out and delivery, restaurant kitchens were never forced to close during the pandemic and therefore the need to conduct health and sanitation inspections remained, Williams said in an email Monday. Health permit fees are used to partially offset those inspection costs.
In addition, Williams noted that the Santa Clara County Board of Supervisors last week unanimously approved a small business permit fee relief program for those impacted by the pandemic. The county’s Department of Environmental Health will issue a one-time credit equivalent to the annual cost of a business’ existing permit fees.
Businesses eligible for Santa Clara County’s permit fee waiver program include restaurants with up to 25 employees, food retailers and grocery stores up to 20,000 square feet, swimming pools and spas and body art facilities. Businesses that operate more than two store locations within the county do not qualify.
Nevertheless, Jot Condie, president of the California Restaurant Association, said the lawsuits “deliver a clear message about the willingness of restaurants to go the distance to recover fees,” adding that he expects thousands of restaurants will be willing to join the lawsuits in their respective counties.